Hydro Systems Engineering Associates, Inc., provides consulting services to city water authorities. The consulting firms contribution-margin ratio
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Hydro Systems Engineering Associates, Inc., provides consulting services to city water authorities. The consulting firm’s contribution-margin ratio is 20 percent, and its annual fixed expenses are $120,000. The firm’s income-tax rate is 25 percent.
Required:
1. Calculate the firm’s break-even volume of service revenue.
2. How much before-tax income must the firm earn to make an after-tax net income of $48,000?
3. What level of revenue for consulting services must the firm generate to earn an after-tax net income of $48,000?
4. Suppose the firm’s income-tax rate rises to 27 percent. Explain what will happen to the break-even level of consulting service revenue.
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Related Book For
Managerial Accounting Creating Value In A Dynamic Business Environment
ISBN: 9781264100699
13th Edition
Authors: Ronald Hilton, David Platt
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